TECHNICAL
To aid later analysis within this paper, Figure 3.1 also includes some brief comments on Investor Support coupled with some initial thoughts on an organisational structure of a typical ISP 13 . For clarification purposes, Figure 3.1 does not differentiate between the author’s three classifications of altnet, viz: • Wholesale only (City Fibre and Openreach as examples) • Vertically integrated i.e. wholesale and retail • Retail only i.e. ISPs that use wholesale products from the likes of City Fibre and Openreach altnet Status (Sep 2021) Figure 3.2 opposite is one snapshot of altnet status, as of Sep 2021 and note that Openreach (for this paper) is not considered by the author to be an altnet. Within this brief sample of altnets it could be argued as to whether history is repeating itself? The author also questions (and this can be tested via examining historical finances) as to whether any of the altnets identified in Figure 3.2 were in profit as of August 21? The author further suggests that only Openreach may meet the criterion. This will be examined further within this paper. Infrastructure funds are now “playing.” It is also interesting to note (as of Oct 21) that a number of financial institutions are “playing” i.e. they have a controlling financial position in some of the altnets, as illustrated in Figure 3.3 to the right. Some Observations From the sample of altnets and investors identified, fibre in the access network is a sound bet. However, and at the time of authoring this paper (October 24) some of the altnets identified earlier have either been absorbed into another altnet or have ceased trading.
Figure 3.3 –– Sample of UK Investors participating within UK FTTH market (Oct 21)
operational support has been “consolidated” across their three brands – a good example of cost reduction and market facing. It could be argued that some of the essentials of business planning i.e. identifying market share and the associated addressable market, and more importantly the competitive status, may have been missed. Developing the author’s argument further in that “was a business plan and modelling exercise carried out by all altnets before buildout, etc,” and more importantly, whether investors tested the many altnet business plans by financial modelling? Finally, and the ultimate test of altnet success (or otherwise) is whether they “track” the business plan in measuring profitability? This can, of course, be tested. The Modelling 14 of an ISP/ altnet A brief note to introduce the “thorny” subject of modelling and, in this paper, as a necessary input to any business plan. As a general comment, an investor will insist on a business plan before any
discussions on funding are initiated. If a business plan is approved, it should then be used as the basis of a performance monitoring tool during the life of the company. The Business Plan Effective business planning requires a structured quantitative approach. A central part of such an approach is a financial model used to explore the potentials and sensitivities of any business case. In many cases considerable effort is expended building the financial model from scratch and often insufficient testing results in errors that may go undetected. In today’s rapidly changing environment companies often need to review their market position and even reassess their strategic objectives. This need may be triggered by, for example, loss of market share to a competitor, a requirement for refinancing or the planned introduction of a new product or service. Poorly prepared business plans, created in an ad hoc fashion, can fail to reflect the complex situation facing the business. They may prove difficult to implement, requiring frequent adjustment, and can, in some circumstances, cause significant losses to be incurred.
Fern Trading is an interesting example in that (and as the author understands)
8 Sometimes referred to as an “Internet Service Provider” or ISP 9 Just Deliver the Bits: David Isenberg and John Nolan, 2010, Journal of the ITP, Vol 4 Part 1. – see https://bit.ly/36SkoMp 10 Note that for the purposes of this discussion, the signal transmission technology is GPON (or later variant). It should also be noted that wireless alternatives to fibre in both the access and backhaul networks are available, but this paper’s focus is fibre.
11 Public Switched Telephone Network 12 Independent Networks Co-operative Association – an excellent initiative and see https://www.inca.coop/news/altnet-report-2024 13 Introduced here and expanded upon in Section Five. 14 Note that this paper and the analysis is constrained to FTTH service providers
DECEMBER 2024 Volume 46 No.4
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